Business context and reporting period
This is AMP Holding Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2012—not a filing under the name Workhorse Group Inc. The company, then a development-stage electric-vehicle business, designed and marketed converted electric automobiles and commercial trucks. It reported that sustaining revenue-generating operations had not fully commenced.
Financial performance and position
| Metric | Q1 2012 / March 31, 2012 | Comparable period / prior year-end |
|---|---|---|
| Revenue | $0 | $82,500 in Q1 2011 |
| Expenses | $1,160,732 | $1,945,457 in Q1 2011 |
| Net loss | $1,160,732; loss per share $0.03 | $1,862,957; loss per share $0.07 in Q1 2011 |
| Operating cash flow | $(929,702) | $(1,155,717) in Q1 2011 |
| Cash | $51,190 | $89,488 at December 31, 2011 |
| Current assets / current liabilities | $217,544 / $2,742,484 | $267,717 / $1,936,648 at December 31, 2011 |
| Long-term debt | $66,738, plus $21,857 current portion | $69,550, plus $20,641 current portion at December 31, 2011 |
Working capital was negative $2,524,940. Stockholders’ equity was in deficit by $2,425,704. No meaningful margin can be assessed because Q1 2012 revenue was zero. The filing reports cumulative losses of $18,259,501 since inception.
Material changes versus the prior comparable period
Revenue fell from $82,500 to zero. Net loss narrowed by about $702,000 and operating cash use improved by about $226,000, primarily as development activity and staffing were reduced. Stock-based compensation decreased to $153,032 from $332,780; payroll and payroll taxes declined to $550,922 from $625,407. The company raised $900,000 through secured convertible debentures, but cash still fell by $38,298 during the quarter. Current liabilities rose by about $806,000, including $825,574 of convertible debentures reported at quarter-end.
Outlook, risks, contingencies and unusual items
- Funding and going concern: Management and the filing state that substantial doubt exists about the company’s ability to continue as a going concern. Management estimated it would need $7 million–$10 million over the next 12 months to carry out its business plan. It warned that without near-term capital it might need further layoffs and could cease operations by May 31, 2012. No assurance of financing was given.
- Liquidity stress: The filing describes delayed payroll, overdue supplier balances, collection-agency referrals, and current purchases made on a cash-on-delivery basis. As of March 31, accounts payable was $1,290,465, apart from related-party payables and other current liabilities. There was no revolving credit facility.
- Financing and dilution: The $900,000 notes bear 10% interest, mature one year from issuance, and are convertible at the investors’ option at $0.50 per share, subject to a $0.25 floor. Investors also received warrants for 900,000 shares exercisable at $0.50, and a pro-rata right to participate in the next financing up to $1 million. The company also issued 177,515 shares for $60,000 of legal and consulting services.
- Commercial prospects: A March 30 agreement with FedEx covered conversion of two demonstration vehicles. An April 10 Navistar development and supply agreement called for two electric step vans by summer 2012; further orders depended on meeting specifications. These were development opportunities, not disclosed as assured recurring sales. The planned Iceland distribution phase was delayed amid uncertainty over an electric-vehicle VAT change; a Caribbean distribution MOU remained subject to a definitive agreement.
- Other notable matters: The company reported ineffective disclosure controls and material weaknesses, including inadequate segregation of duties and reliance on external consultants and attorneys. It disclosed no material legal proceedings, but noted delinquent supplier payments. Several employees and directors left or reduced their involvement; the chairman resigned in April. The company also cited competition, uncertain EV demand, supplier dependence, regulatory and product-liability risks, and potential equity dilution.
Important facts for investors to verify
- Whether the company obtained sufficient financing after the filing date to meet payroll, overdue obligations, and its stated $7 million–$10 million funding need—and whether the May 31 cessation warning was resolved.
- The terms, outstanding balances, collateral, maturity dates, and potential dilution from convertible debentures, warrants, shareholder advances, and other securities.
- Whether FedEx demonstrations and Navistar vehicle development were completed successfully, and whether either customer placed binding follow-on orders.
- The status of the Northern Lights Energy distribution agreement and the U-Go MOU, including any definitive commitments, purchases, or revenue.
- Whether payroll and supplier arrears, collection activity, and reported control weaknesses were addressed; also reconcile the reported liabilities and cash position against subsequent filings.